image title
ULIP INSURANCE

Mutual Fund Performances and the New Tax

Joan Mathews Joan Mathews 20 February 2019

To invest in the right mutual fund schemes, investors need to first be aware of the best-performing funds in the market. Knowledge of past and current performance is essential as it gives one an understanding of each fund’s quality and strategy.

Mutual Fund Performances And The New Tax

It has often been observed that when individuals decide to go ahead and invest in mutual funds, they follow the advice of an agent and park their money in the schemes recommended by him or her. While this is one way to participate in the market, how can you know for certain that the funds suggested are the best options for you? Now consider this…

When you buy groceries, you look at the manufacturing and expiration dates, when you buy furniture, you consider its brand, durability, etc. and if you decide to buy a second-hand asset, say like a car, you will factor in the impact of depreciation, in addition to general elements like make, model, etc. In all these instances, you are basically taking an informed decision over the purchase that you make. So, what do you do when an agent tells you an XYZ fund is your best option to generate wealth? Do you research on your own and enquire about the experience shared by others with this particular fund or do you go ahead and invest in the fund without asking any questions? Well, the choice is up to you.

In this article, we will walk you through the performance of mutual funds as well as recent developments witnessed in the industry, like the LTCG tax, to enable you to make the right call over where you invest your hard-earned money.

Top Performing Mutual Funds

  • Equity Schemes: The following table constitutes a combination of best performing mutual funds in the equity category as ranked by CRISIL Mutual Fund Ranking Agency.
Fund Scheme Name6 months (Returns %)1-Y Return %3-Y Return %
Mirae Asset Tax Saver Fund-7.62-1.8421.22
Taurus Taxshield-10.38-3.1216.39
Aditya Birla Sun Life Tax Relief 96-9.54-4.9814.49
Axis Focused 25 Fund-14.73-1.4917.07
SBI - ETF SENSEX-6.115.5515.93
Axis Bluechip Fund-6.997.5115.84
Franklin Build India Fund-10.39-11.5913.74
Kotak India EQ Contra Fund-8.531.8816.41
HDFC Small Cap Fund-12.16-13.9419.37
Mirae Asset India Equity Fund-6.67-0.4017.85

*Returns as on February 18, 2019

  • Debt Schemes: The following table constitutes a combination of debt schemes as ranked by CRISIL Mutual Fund Ranking
Fund Scheme Name6 months (Returns %)1-Y Return %3-Y Return %
Axis Banking & PSU Debt Fund4.958.027.84
IDFC Banking & PSU Debt Fund4.977.857.00
IDFC Corporate Bond Fund4.006.967.88
L&T Triple Ace Bond Fund3.655.226.79
Reliance Gilt Securities Fund5.899.229.50
Edelweiss Government Securities Fund4.696.228.08
IDFC Bond Fund - Short Term4.357.097.23
Axis Strategic Bond Fund3.936.868.92
Principal Credit Risk Fund3.406.447.36
Sundaram Short Term Credit Risk Fund3.667.146.93

*Returns as on February 18, 2019

  • Hybrid Schemes: The following table constitutes a combination of best performing mutual funds in the hybrid category as ranked by CRISIL Mutual Fund Ranking.
Fund Scheme Name6 months (Returns %)1-Y Return %3-Y Return %
Principal Hybrid Equity Fund-6.33-3.1016.91
Mirae Asset Hybrid - Equity-4.430.6714.24
Reliance Arbitrage Fund3.226.366.30
ICICI Prudential Regular Savings Fund1.885.7110.82
LIC MF Debt Hybrid Fund0.942.396.64

*Returns as on February 18, 2019

  • Money Market Schemes: The following table constitutes a combination of money market schemes as ranked by CRISIL Mutual Fund Ranking.
Fund Scheme Name6 months (Returns %)1-Y Return %3-Y Return %
Indiabulls Liquid Fund3.657.397.27
DHFL Pramerica Insta Cash Fund3.787.557.26
IDFC Low Duration Fund4.027.487.73
DSP Low Duration Fund4.157.697.57
HDFC Money Market Fund3.977.607.12
L & T Ultra Short Term Fund4.027.687.59

*Returns as on February 18, 2019

Market Performance in 2018

Schemes that targeted technology funds were a boon for investors throughout last year as the domestic equity market paddled its way through many uncertainties. During a time when majority of the mutual fund categories, including large-cap, mid-cap, and small-cap, suffered on account of secular market movement, IT funds remained put.

Debt funds outperformed several equity mutual funds in the last year. Liquid funds were the best performing mutual funds in the debt category, with returns recorded at 6.89%. Long duration funds came in the second place with 6.84% returns and GILT funds with 6.56% returns. Short duration funds saw returns of 6% last year.

Long Term Capital Gains Taxation

Finance Minister Arun Jaitley reintroduced Long Term Capital Gains (LTCG) tax for equity mutual funds and direct equities while presenting Budget 2018. LTCG tax had been exempted for equities and equity mutual funds since 2004.

Investors have to pay 10% tax on profit surpassing Rs. 1 lakh on sale of shares or equity mutual fund schemes held for more than a year. The 'grandfathering' clause is the exemption granted to investors on their gains earned before the new tax law was put into effect - thus allowing all long-term gains until January 31, 2018 to be protected. LTCG tax continued to be applicable on debt funds at the rate of 20.6% after three years.

Outlook for 2019

Experts believe that debt funds will perform well in 2019. Following a volatile 2018, such funds are very well placed and expected to offer good returns. Investors are advised to consider short-duration funds in the one to three-year segment. It must, however, be noted that while debt mutual funds are important for one’s overall portfolio returns, there should be a mix of assets matching the investor’s risk profile and investment horizon. This will reduce the impact of a possible decline in the value of any one security, thus creating a sort of safety net for the investor.

Recommended Read: Understanding Taxation in Mutual Fund Investments

Joan Mathews
Written by Joan Mathews
Joan has over 4 years of experience writing for the BFSI industry. She enjoys watching mystery TV series, listening to 80s classics and spending time with her furbabies.